Peso weakens on US-China tensions, PMI contraction
THE PESO weakened versus the greenback on Monday amid risk-off sentiment following tensions between US-China鈥檚 as well as the further contraction of the local manufacturing sector.
The local currency finished trading at P50.595 versus the dollar, weakening by 19.5 centavos from its P50.40 close last Thursday, according to data from the Bankers Association of the Philippines.
The local unit opened the session at P50.55 versus the dollar. Its weakest showing was at P50.62 while its intraday best was at P50.54 against the greenback.
Volume of dollars traded sank to $349.35 million on Monday from the $906.8 million seen on Thursday.
A trader said the peso鈥檚 depreciation on Monday came amid risk-off sentiment following news that the US is looking to impose new tariffs on China.
鈥淭he peso depreciated after the recent threat of new tariffs from President Trump escalated market fears of renewed US-China geopolitical tensions,鈥 the trader said in an e-mail.
Reuters reported that US President Donald J. Trump threatened new tariffs on Beijing as Washington heads on for retaliatory measures over the outbreak.
Sources told Reuters that the US is looking into a range of options against China but these are in their early stages.
鈥淲e signed a trade deal where they鈥檙e supposed to buy, and they鈥檝e been buying a lot, actually. But that now becomes secondary to what took place with the virus,鈥 Mr. Trump told reporters, as reported by Reuters. 鈥淭he virus situation is just not acceptable.
Aside from this development on the US-China trade relations, weaker local data also hurt the peso鈥檚 strength, according to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.
鈥淭he peso was also weaker after the latest decline in Philippine manufacturing data,鈥 Mr. Ricafort said in a text message.
The manufacturing sector saw contraction in April as factories faced shutdowns due to the lockdown done to prevent the spread of the coronavirus disease 2019 (COVID-19).
On Monday, IHS Markit released the Philippine Purchasing Managers鈥 Index which dropped to 31.6 in April from the 39.7 seen in March as well as the 50.9 logged a year ago.
A reading below 50 indicates contraction in the manufacturing sector.
鈥淧roduction fell rapidly, while new orders and export sales declined at record paces,鈥 IHS Markit said.
For today, the trader sees the peso moving between P50.50 to P50.70 versus the dollar while Mr. Ricafort gave a forecast range of P50.45 to P50.70. 鈥 Luz Wendy T. Noble with Reuters
